|
|
|
Release Date: 02/06/2001
Release Number: 01-20
Contact Name: Gloria Della
Phone Number: 202.219.8921
|
|
|
|
|
The U.S. Department of Labor today filed a lawsuit and
obtained a temporary restraining order freezing the assets of SAI MED
Health Plan, L.L.C. of Rockville, Maryland, and its principals to prevent
further depletion of health plans assets. Participants in various states
including Maryland, Virginia and West Virginia are owed at least $1.6
million in outstanding health claims. |
|
Beside freezing the assets, the restraining order
removed the defendants from the SAI MED plans and barred the defendants
from providing services or receiving compensation from SAI MED. The court
also appointed David W. Silverman, of the New York firm Granik, Silverman,
Campbell & Hekker, to be the independent fiduciary. A hearing on the
restraining order was held this afternoon in a federal district court in
Greenbelt, Maryland. The court is scheduled to hold a hearing on the
preliminary injunction on February 21, 2001. |
|
The department’s actions closely follows a cease and
desist order issued on January16, 2001 by the State of Maryland revoking
SAI MED’s registration as a third-party administrator and ordering the
company to stop any unauthorized insurance business in the state. The
state’s Insurance Commissioner took this action because the firm failed
to obtain required stop-loss insurance and to pay health claims. |
|
Prior to 1999, SAI MED was a multiple employer welfare
arrangement which marketed its services to employers. The company pooled
the premiums of client employers to cover all claims. |
|
In 1999, SAI MED began to sell a self-insured welfare
plan to employers, which was designed to include the purchase of stop-loss
insurance to pay employees’ health claims in excess of the attachment
point. The company collected health benefit premiums and processed claims
of an estimated 4,000 employees of 200 sponsoring employers at various
times. |
|
SAI MED set its own compensation and paid its bills,
including the salaries of defendants Samuel Kreiter and Martin Sonnenberg,
while claims of participants remained unpaid. At the end of 2000, SAI MED
had approximately $276,000 in its accounts. |
|
SAI MED ceased operations on February 1, 2001 without
any prior notification to plan clients. At that time, the company had
processed and was holding at least $1.6 million worth of claims checks in
its offices for unpaid claims dating back to as early as November 1999. |
|
The Labor Department’s lawsuit alleges that SAI MED,
president/general counsel Kreiter and chief financial officer/treasurer
Sonnenberg violated the Employee Retirement Income Security Act (ERISA)
when they failed to:
-
Hold plan assets in trust accounts
and instead commingled the plans’ assets with the general operating
account of SAI MED
-
Pay premiums to purchase stop loss
insurance, which resulted in cancellation of stop-loss coverage for
all groups retroactive to January 2000
-
Notify the plans of the loss of
coverage while continuing to collect premiums
-
Return to the plans refunds of
premiums resulting from cancellation of the stop-loss coverage
-
Mail checks for processed claims
even though the checks were generated by defendant Sonnenberg
-
Collect sufficient funds from the
employers to pay benefit claims
-
Pay claims instead of paying itself
excessive fees.
|
|
The department also asked the court to permanently
order the relief contained in the temporary restraining order. |
|
This case resulted from an investigation conducted by
the Washington District Office of the department’s Pension and Welfare
Benefits Administration into alleged violations of ERISA. |
|
(Chao v. SAI MED Health Plan, LLC
Civil Action No. 01-CV-325) |
|
U.S. Department of Labor
news releases are accessible on the Internet. The information in this news
release will be made available in alternate format upon request (large
print, Braille, audio tape or disc) from the Central Office for Assistive
Services and Technology. Please specify which news release when placing
your request. Call 202.693.7773 or TTY 202.693.7775. |
